Presentation instruments, such as personal checks, business checks, and the like, have long been used as payment instruments when transacting business. Merely by way of example, if a customer wishes to purchase merchandise from a merchant, and the customer does not wish to use cash, the customer might elect to pay for the merchandise by personal check, business check, and/or the like.
While somewhat convenient, the use of such presentation instruments does have limitations. For example, if the merchant elects to refund some of the paid monies, the merchant usually must provide the refund in cash (or other funds), since there is currently no way for the merchant to “un-wind” a presentation instrument transaction, once the instrument has been processed and/or negotiated. (Of course, the customer could request that the customer's financial institution stop payment on the check, but that process is lengthy and generally is too burdensome merely to facilitate a refund. Moreover, if the check has already been paid, it may be to late for a stop payment order to be effective.)
Moreover, the characteristics of a presentation instrument transaction render the transaction vulnerable to various types of fraud. For example, a customer can purchase merchandise with a bad check (e.g., a check drawn on an account with non-sufficient funds, etc.) and then return the merchandise for a cash refund, putting the merchant (and/or a financial intermediary, such as a check processor) at risk of being unable to clear the check, while the customer walks away with the cash.
Thus, there is a need for a more robust method of adjusting payment instrument transactions.